How To Choose The Best Amortization Period For You

Amortization Period: the number of years it will take you to pay off your mortgage balance in full. Balance owing is $0.00 !

Term: The period of time that your current mortgage rate and terms of your mortgage agreement are in effect. If you have a one year term at the end of the year you will have to renew your mortgage, negotiate the mortgage agreement or pay it in full.

  1. The number one reason people want to take the longest amortization period possible because your monthly payments are less.
    This may be important to you if your income is not regular or consistent. You do not receive income on a bi-weekly or monthly basis (paycheque).
  2. You are a first time home buyer and want to get used to having the extra expenses involved in home ownership. When you have worked out a budget you may be able to increase your payments or decrease your amortization, depending on the terms of your mortgage.
  3. You may be able buy a higher priced home in an area or with attributes you could not afford if you choose a shorter amortization period.

As long as you, the buyer, are fully aware of the difference in the long term interest payment, you can choose the amortization that best suits you.

Check out the table below to see how much your amortization choice can cost you.

Mortgage Amount Amortization Monthly Payment Total Interest Paid
$150,000 30 years $841.00 $152, 860.00
$150,000 25 years $911.00 $123,368.00
$150,000 20 years $1,022.00 $95, 391.00
$150,000 15 years $1,217.00 $69, 027.00
$150,000 10 years $1, 620.00 $44, 360.00

* numbers are based on a $150,000 mortgage, assuming a constant annual interest rate of 5.45%

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